People worried about bankruptcy might find it difficult to believe that it can help you out of financial distress. Chapter 13 bankruptcy, say Dallas based bankruptcy law firm Recovery Law Group lawyers, offers you to catch up on mortgage payments, reduce some secured debts, pay a small amount of your unsecured debts while getting rid of the remaining through its repayment plan. Apart from this, you can also contest foreclosure proceedings, claims for costs for missed payments and get rid of liens on your home through bankruptcy! Contemplating filing for bankruptcy? Consult with expert bankruptcy lawyers at 888-297-6023 to know more about how you can benefit from bankruptcy.
There are various benefits associated with bankruptcy. Here are a few ways you can improve your financial distress with Chapter 13:
- Repay mortgage arrears
Being behind on your mortgage payments has repercussions. However, so does the filing for bankruptcy. In case you are filing for bankruptcy with the sole purpose of catching up with mortgage payments, this can be done by negotiating a deal with the mortgage servicer, without harming your credit score. However, if you have previously defaulted, then bankruptcy might be the only way out. It might also be cheaper as you don’t have to pay various fees.
Chapter 13 repayment plan works only if you can show that you have enough disposable income to not only clear your past dues but also current payments, apart from priority debts like taxes. Additionally, you need to provide your bankruptcy trustee gets nearly 10% of the amount payable to your creditors through the repayment plan.
- Make mortgage affordable
Many people with large unsecured debts often seek financial assistance through bankruptcy. Chapter 13 offers a chance to reduce your debts to affordable limits and get remaining unsecured debts discharged after a 3 to 5 years’ time. Your disposable income is used to pay a portion of your secure, priority and unsecured debts. In case you have disposable income below the state median you might have your unsecured debts discharged. Including mortgage along with unsecured debts, will allow you to catch up on both and with unsecured debts discharged at the end of the repayment plan, you might be able to afford the mortgage. Low-income bankruptcy filers can opt for a 3-year repayment plan, however, increasing your repayment plan from 3 years to 5 years will reduce the per month payments.
- Get secured debts reduced
Assets like motor vehicles depreciate with time, however, the loans don’t. Chapter 13 bankruptcy Dallas judges could reduce the secured debt to the market value of the car as well as the interest rate to the going rate in bankruptcy cases. This will provide you with more money for other secured loans and come up with a repayment plan with better chances of confirmation. The cram down is available only for assets like cars (bought 30 months prior to bankruptcy filing), personal property (computers, jewelry, furniture, etc.) bought at least 1 year before filing, any rental on vacation homes, loan on mobile homes (classified as personal property by your state) and on mortgages which can be paid off within five years.
- Contest foreclosure
Though automatic stay prevents any foreclosure activity when you file for bankruptcy, the lender can ask and get permission to have the stay lifted. However, you could contest foreclosure because of erroneous facts provided by the lender in bankruptcy court. A favorable verdict in your case may prevent foreclosure, even if you convert your chapter 3 bankruptcy into a chapter 7 one.
- Turn subsequent mortgages into unsecured debts
Many times, homeowners take out a 2nd and 3rd mortgages on their homes. Filing for bankruptcy means that you have fallen behind on payments, forcing foreclosure. In case your property is no longer worth the amount of mortgage owed, the second and third mortgages could be stripped off by bankruptcy court in case of Chapter 13 bankruptcy. This turns any subsequent mortgages into unsecured debts, which are treated in a similar fashion. You don’t need to catch up on past dues, your disposable income is used to pay off debts (secured, priority and unsecured) and any unsecured debt which remains is discharged.